Solved: Why the return-on-equity ratio is so much less favorable, Finance Basics

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Why the return-on-equity ratio is so much less favorable

Problem:

Front Beam Lighting Company has the following ratios compared to its industry for 2008.

Front beam lighting Industry
Return on assets 12% 5%
Return on equity 16% 20%

Explain why the return-on-equity ratio is so much less favorable than the return-on-assets ratio compared to the industry. No numbers are necessary; a one-sentence answer is all that is required.

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Finance Basics: Why the return-on-equity ratio is so much less favorable

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